On December 6, 2017, Senator Murphy introduced his latest iteration of the 21st Century Buy American Act (S.2196), which according to his press release is intended to address “Buy American laws [that] are outdated and full of loopholes.” Like the 2015 version of the bill (S.2167) introduced on October 8, 2015, the 2017 version would:

Modify the Buy American Act’s cost of components test (applicable to non-COTS items) by requiring that an item’s U.S. component costs exceed 60% of the item’s total costs (the current threshold is set at 50%);

Limit the so-called “overseas exemption” by specifically applying the Buy American Act preference to items procured for use outside the U.S., unless the items are “needed urgently for national security reasons” or the cost to procure those items domestically is unreasonable based on a cost analysis;

Provide that an agency cannot apply the public interest exception unless it “consider[s] the short-term and long-term effects of applying such exception on employment within the United States”;

Commence a “program to make or guarantee loans” for contractors that seek to manufacture or produce certain items that are not currently manufactured or produced in the U.S.; and

Increase transparency related to the use of exceptions.

The only substantive difference between the 2015 and 2017 versions of the bill is that the 2017 version includes more detailed/robust requirements geared towards increasing transparency regarding (and providing more accountability for) the use of “Buy American” exceptions, including the following:

The General Services Administration would be required to establish a public website (BuyAmerican.gov) that would provide information about “all waivers of and exceptions to Buy American laws that have been requested, are under consideration, or have been granted by executive agencies and be designed to enable manufacturers and other interested parties to easily identify waivers.”

No agency would be permitted to approve a “Buy American” exception unless the request for the exception (and certain information regarding the request) was made publicly available, and an opportunity for public comment was provided.

There would be specific requirements regarding the types of information needed to “adequately document and justify the statutory basis cited for the requested waiver,” including “a certification that the procurement official or assistance recipient made a good faith effort to solicit bids for domestic products supported by terms included in requests for proposals, contracts, and communications with the prime contractor.”

If passed by Congress, this bill would have significant ramifications for contractors. For example, modifying the cost of components test to require that an item’s U.S. component costs exceed 60% (instead of 50%) of the item’s total costs would have major consequences for those contractors currently relying on global supply chains. Requiring public notice even for requested waivers and certifications of contracting officials before granting waivers would further complicate an already complicated system at a time when Congress is very concerned that our procurement system, at least for defense procurement, is denying our warfighters of the latest technologies and services, e.g., Section 809 Panel. Conversely, the proposed program to jumpstart the U.S. manufacture or production of currently nonavailable items may open new opportunities for certain contractors. Finally, the increased scrutiny and requirements regarding “Buy American” exceptions likely would reduce the number of exceptions granted.

By way of background, President Trump’s “Buy American” Executive Order (EO 13788, Apr. 18, 2017) directed Commerce Secretary Wilbur Ross (in consultation with Secretary of State Rex Tillerson, OMB Director Mick Mulvaney and U.S. Trade Representative Robert Lighthizer) to submit a report to the President by November 24, 2017 that provides “specific recommendations to strengthen implementation of Buy American Laws, including domestic procurement preference policies and programs.” Secretary Ross has not yet published this “Buy American” report, and Senator Baldwin has taken notice.

In her December 13, 2017 letter to the President, Senator Baldwin “urge[d]” the “Administration to expedite the publication of this now late report,” which she anticipates will “provide an important first step to enforcing existing Buy American laws.” Significantly, Senator Baldwin also extended the President an olive branch “to work together to ensure Congress strengthens our government’s commitment to buying American-made goods in order to improve wages, boost growth, and support American manufacturers.” In doing so, she recounted her recent efforts to strengthen “Buy American” laws, and reminded the President that he previously endorsed her proposed Made in America Water Infrastructure Act legislation (S.880, Apr. 6, 2017), and promised that his Administration would “take bold, new steps to follow through on [his] pledge to Buy American and Hire American.”

In addition, Secretary Ross’s forthcoming “Buy American” report, which is expected to provide specific recommendations for strengthening “Buy American” laws, may offer an opening for Senator Murphy (and other congresspersons) because that report could reveal that certain Senate Democrats and the Trump Administration actually share some of the same ideas on this matter. In fact, the Trump Administration’s “Buy American” report may very well become the final piece that pushes Congress and/or the Trump Administration towards “Buy American” action, potentially with bipartisan support.

Contractors should closely monitor these developments as any change to the current “Buy American” regime could have substantial consequences downstream.